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SIP stoppage ratio jumps to fresh high in March
17-Apr-2020
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Even as the monthly SIP inflow figure hit a 12 month high in March 2020 of 8,641 crore, another key measure of SIP data showed an alarming trend. The SIP stoppage ratio hit 71% in March 2020, crossing its previous high of 66% in September 2019 to also hit a 12 month peak. As per media reports, this latter figure was an 18 month high The ratio measures the number of SIPs discontinued or expired as a percentage of fresh SIPs registered. The jump in the March figure was largely due to a drop in fresh SIPs being registered rather than existing SIPs being discontinued.

Financial advisors have been largely optimistic about investor behaviour, suggesting that the ratio may not be indicative of a strong trend."I have not seen any SIP stoppages among my clients. There have also not been many layoffs yet. Some of the closures might stem from direct investors coming through online platforms," said Prakash Praharaj, founder Max Secure Financial Planners.Kalpesh Ashar, founder, Full Circle Financial Planners and Advisors took a more cautious approach. “"We are living in an economic environment where the crisis is one of health and lives, not just money. Every job and profession is being affected to some degree. I have advised my clients to first shore up their emergency funds rather than aggressively investing in equities," he said. Ashar said that he has advised clients to continue with existing SIPs as long as it does not put a strain on their monthly cashflows.

As noted by financial advisors, investors should continue with their SIPs in line with their risk appetite and financial goals provided their emergency corpus has been built. SIPs or Systematic Investment Plans accumulate more mutual funds units as markets decline and work best in falling markets. They also take away the need to time markets for investors.

Source : Live Mint back
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